Also, my understanding is that on expiry the deliverable contracts get converted into underlying futures contract.
The options have monthly expiries, but the futures contract are not there for all months.
Like gold will have futures for Feb, Jun, Aug, OCt, Dec
Silver will have futures for Mar, May, Jul, Sep, Dec.
Then how do the options contracts settle? for the nearest futures contract?
When is the expiry date for the gold & silver options? When do they enter deliverable period ie, become illiquid?
Monthly contracts would have thin liquidity and aren’t practical due to physical delivery constraints.
When it heading to the expiry if yu dont close due to illiquidity or any reason, yu have to maintain sufficient funds to devolve into nearest future available expiry. If fail to maintain funds, it will become worthless.
3 -5 working days before expiry. As margins go up. The liquidity dries up as well.
why will you close out positions from monday itself. last 2-3 days we get the maximum decay. for OTM options whats the risk. anyways margin in gold/silver options is same as margin for the futures contract. let it devolve into the equivalent futures positions if it goes into ITM. Atleast you shouldnt square off OTM option positions
Can someone provide a precise reply to the below query? Thanks.
GOLD has Futures only in alternate months. For example, GOLD JUN FUT expires on 05.06.2025, there is no GOLD JUL FUT, and GOLD AUG FUT expires on 05.08.2025.
We have GOLD Options, both PE and CE expiring every month. For example, GOLD MAY 95000 CE expires on 27.05.2025. 95000 CE is benchmarked against GOLD JUN FUT price (Futures price is considered as the Spot price to determine whether the Options expires ITM or OTM). If GOLD MAY 95000 CE expires ITM, then it will devolved into GOLD JUN FUT (if sufficient margins are available). This much is clear.
Consider this scenario. GOLD JUN 95000 CE expires on 30.06.2025. There is no GOLD JUL FUT. Will GOLD JUN 95000 CE be benchmarked against GOLD AUG FUT to determine whether it expires ITM or OTM? If it expires ITM, will GOLD JUN 95000 CE devolve into GOLD AUG FUT on the expiry day on 30.06.2025?
